Tax-Free Transfer of Wealth

Client Scenario


Resa has been a single mom to her son Andrew since he was 10. Now 30, Andrew is making wedding plans and Resa is revisiting her financial plans with her wealth planner, Tad. The 60 year-old OB/GYN is preparing for retirement sometime in the next ten years, though grandchildren may hasten that decision.

Early in her life as a divorced mom, Tad recommended that she consider a no-load variable universal life policy rather than traditional term life insurance to provide for Andrew in the event of her untimely death. Though she didn’t have much in the way of tangible assets, her earning potential was very high. Because of her high salary and earning potential, a VUL policy suited her needs.

With a VUL policy, Tad explained that she would be able to invest some of the policy’s cash value in subaccounts so that they would grow and accumulate to provide a better foundation, should Andrew need it. These mutual-fund-like investments would expose her to market fluctuations, but she didn’t mind the risk because her time horizon was long.

Resa liked the idea of putting that money to work for her to provide Andrew a more comfortable life, and she understood the value of tax-free distribution when the wealth was to be transferred.

Because the policy paid no commissions, the internal costs were relatively low. Reducing the cost of insurance allowed more of that money to work for Resa and her son’s future family. Now, with the cash value relatively high, Resa has the flexibility to take loans from the policy to help Andrew and his fiancé finance their wedding or their first house, if and when they need it.


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